[size=55:3srec70p]BNR o4 October 2010

2011 Budget envisages no changes in tax burden and incomes

In the words of Finance Minister Simeon Djankov, the essential characteristics of the 2011 draft budget are that taxes will not be elevated, while pensions and salaries will remain unchanged at their current level. “In times of crisis or emerging out of difficult times no changes should be made to taxes and social security installments that will otherwise unnecessarily encumber the system,” he argued. The 2011 state budget as drafted envisages a 3.6% economic growth, while budget deficit will account for 2.5% of the country’s Gross Domestic Product (GDP). There are only three countries within the European Union that manage to uphold the pressure of the economic crisis by not raising taxes and cutting down on salaries and pensions in 2010 and 2011, and Bulgaria is one of them, which is only ‘indicative of the right fiscal policy the government in Sofia” has undertaken, Djankov commented highlighting in particular the 0.5% economic growth over the second trimester of the year.

“As of January 2011 Bulgaria will have the lowest tax burden regarding households and the businesses among EU countries,” Finance Minister Simeon Djankov argued. “Since the beginning of 2010, Bulgaria has achieved the lowest tax rates for the households, and next year the same will hold true for the businesses, too. Our main rival in terms of low tax burden, Slovakia, will increase value added tax (VAT) as of January 1, 2011, leaving thus Bulgaria the country with the lowest tax load in the entire European Union.”

The business and the social partners criticized heavily the 2011 draft budget claiming that the envisaged economic growth rate was within the domain of ‘economic science fiction’, and feared that the budget deficit would exceed the 3% of GDP benchmark. Trade unions and employers voiced their opinion that the government-drafted indices would lead to a 7% reduction in incomes, and in general to an impoverishment of the population. One of the main reasons is the inflation rate that would ‘eat out’ the frozen income. Economy analysts defined the draft budget as ‘wishful’ rather than ‘realistic’, and some even claimed it to be ‘impossible to perform’. Nevertheless Bulgaria’s Finance Minister remained steadfast that the state budget deficit could be sustained below the 3% of GDP benchmark even at zero economic growth, which will still help abide by EU requirements. Simeon Djankov said he counted on better tax collectibility and more efficient distribution of expenditure of state revenues. Moreover, a continuing growth in Bulgarian exports and domestic consumption is expected.

“I have every reason to believe that the projected growth for 2011 is attainable,” the Bulgarian Finance Minister said in reply to the criticism on the draft budget. “In the first place, after years of a relative decline in economic output, both in Bulgaria and the world, it is only too natural that the economy kicks off from a lower baseline, so that, in comparison, the growth rate next year is registered as higher. And this is from a statistical point of view. On the other hand, there is the comfort of the ever increasing growth of Bulgarian exports, which started in October 2009, and continued its upward trend throughout 2010, exceeding 40% in July and August, and we have every single reason to believe the trend will persist.”
The 2011 draft budget envisages changes to the funds allotted to particular sectors and governmental institutions.

“We shall increase the budgets of the health care and defence sectors, mainly by allotting extra EUR 100 million for settling debts to Bulgarian companies,” Finance Minister Simeon Djankov explains. “We also plan to increase the funding for the Interior Ministry mainly to settle previous debts also. Substantial funding will go to the Regional Development Ministry and the overall development of infrastructure. The additional resources will be used in the co-funding of European projects, because as of next year our government will launch a large-scale construction of highways and road infrastructure. There isn’t a single department whose budget has been cut, the only exception being a reduction to the tune of some BGN 160 million (or nearly EUR 80 million) on administrative costs, that will help cover the 3% budget deficit,” the Bulgarian Finance Minister said in conclusion.

I do hope they sort out the health regarding hospitals. After reading an earlier post of doctors and nurses leaving to go else -where, and running out of supplies sounds scary for the future. After all we must take care of our health, it is a number one priority.

Bulgarian FinMin Approves Redirection of Health Reserve

Bulgaria's Finance Minister Simeon Djankov assessed as "
reasonable"
the idea for the reserve of the National Health Insurance Fund (NZOK) to be redirected to the National Social Security Institute (NOI).

"
This is an option for helping indirectly the whole social system. The money would be used properly because the people who use health services the most are the pensioners,"
Djankov said Tuesday in an interview for the Bulgarian private TV channel Nova TV.

He has explained that at the moment, the reserve of NZOK in the Bulgarian Central Bank, BNB, is BGN 1,25 B, and would reach BGN 1,4 B by the end of the year.

Djankov once again denied the allegations that he was using the money from health insurances to fill the budget deficit.

"
This is not true and has never happened. No finance minister has allowed himself to do this and could not do it even if he wanted to,"
he said.

He pointed out that in order for the NZOK reserve to be redirected to NOI, the Parliament has to change the Health Insurance Act.

According to the last update of the Act from 2008, 2% of the health insurances are collected as a reserve in BNB for private health insurance funds.

However, private health funds do not exist at the moment and Djankov stated that the money could be redirected for social activities,

"
Even if the change is adopted, the money would still not go to the health care, but rather to NOI,"
the finance minister said.

Djankov also explained that the reason for providing BGN 65 M to the health care was not the change of the Health Minister.

"
The day before, Eurostat's President confirmed our data and said that Bulgaria has a positive growth, which means that by the end of the year, we should expect bigger incomes. This is where the additional money for health care came from,"
he said.

"
It is normal for people to want more money from me because I am the only one who is giving it. 2010 state budget is better than the previous one for the health care, social fields, defense, environment and infrastructure,"
Djankov said.

In his words, the increase of the budget for these areas would be ensured by taking a loan, which would not necessarily come from outside the country.